Groups: $12 Million Mystery Donation was Crime

JACK GILLUM | Associated Press

WASHINGTON (AP) – Two election watchdog organizations on Thursday urged the Justice Department and Federal Election Commission to investigate more than $12 million in campaign contributions that were mysteriously funneled through two little-known companies in Tennessee to a prominent tea party group. The origin of the money, the largest anonymous political donations in a campaign year filled with them, remains a secret.

The watchdog groups said routing the $12 million through the Tennessee companies appeared to violate a U.S. law prohibiting the practice of laundering campaign contributions in the name of another person. They also said the lawyer in Tennessee who registered the companies, William S. Rose Jr. of Knoxville, may have violated three other laws by failing to organize each company as a political committee, register them as political committees and file financial statements for them with the government.

Rose did not return a telephone message, text message and email from The Associated Press and could not otherwise be reached immediately for comment. He previously told AP that his business was a "family secret" and he was not obligated to disclose the origin of the $12 million routed through Specialty Investments Group Inc. and Kingston Pike Development Corp. Business records indicate that Rose registered Kingston Pike one day after he created Specialty Group, in the final weeks before Election Day. Rose previously complained that phone calls and emails from reporters were irritating.

The watchdog organizations, the Campaign Legal Center and Democracy 21, said a criminal investigation by the Justice Department was necessary "because the integrity of U.S. elections depends on the effective enforcement of the nation's campaign finance laws." They noted that, although the FEC traditionally enforces campaign finance laws and imposes civil fines for violations, the Justice Department can conduct criminal investigations of "knowing and willful" violations under the 1971 Federal Election Campaign Act. Violations could carry up to 5 years in prison. The groups separately urged the FEC to investigate.

The contributions "raise serious questions about whether this was an illegal scheme to launder money into the 2012 elections and hide from the public the true identity of the sources of the money," said Fred Wertheimer, president of Democracy 21. He said no one should be permitted to "launder huge, secret contributions through corporate shells into federal elections."

The money went to the tea party's most prominent "super" political committee, FreedomWorks for America, which spent the money on high-profile congressional races. The $12 million accounted for most of the $20 million the group raised this year. A spokeswoman for the FreedomWorks organization, Jackie Bodnar, did not return a telephone message left with her. FreedomWorks has previously declined to identify who was behind the donations to its super PAC or discuss them further.

The contributions represent a glaring example of the murkiness surrounding who is giving money to politicians in modern elections, shaped by new federal rules allowing unlimited and anonymous donations. The law has allowed wealthy executives, corporations and other organizations to establish shell companies and mail drops to disguise the source of the money they give to political groups and politicians. But the mysterious donations linked to Rose by far eclipse any suspicious money sent to support the campaigns of President Barack Obama and Republican Mitt Romney.

More than half the $12 million in contributions was routed through Rose's companies in the final days before the election even as the AP and Knoxville News Sentinel were jointly investigating $5.2 million in suspicious donations traced to one of the companies during October. That company, Specialty Group Inc., filed incorporation papers in September less than one week before it gave FreedomWorks several contributions worth between $125,000 and $1.5 million each. Specialty Group appeared to have no website describing its products or services. It was registered to a suburban Knoxville home.

Rose subsequently renamed the company Specialty Investments Group Inc. That firm and Kingston Pike Development Corp. – which Rose also registered and owns – were used to steer $6.8 million more in contributions to FreedomWorks. Among other amounts, FreedomWorks spent more than $1.8 million of the money on Connie Mack's unsuccessful Senate campaign in Florida and a similar amount opposing Tammy Duckworth, who was elected to Congress in Illinois.

Under U.S. law, corporations can give unlimited sums of money to outside groups supporting candidates, but not if their sole purpose is to make campaign contributions.

"These companies appear to have been created to hide the identities of one or more donors that pumped millions of dollars into a super PAC anonymously in the final weeks before an election," said the senior counsel for the Campaign Legal Center, Paul S. Ryan. He said such contributions could allow foreign governments, companies or citizens – all of whom are prohibited from donating to U.S. politicians – to launder money into American elections using similar practices.

Rose said in a statement last month that he formed Specialty Group to buy, sell, develop and invest in a variety of real estate ventures and investments. He declined interview requests from the AP over three weeks and complained in his statement that reporters had contacted his ex-wife and business colleagues. He also disputed any characterization that his company was "shadowy."

"The business of Specialty Group is my family secret, a secret that will be kept – as allowed by applicable law – for at least another 50 years," Rose said in his statement.